Leadership in Times of Crisis

CFO in Times of Crisis

Think Strategically

The focus is now on the ongoing financial health of the organization and on rethinking the business model in the new normal. This is where the CFO excels. As the sole member of the executive team who is a financial expert, finance chiefs are essential in assessing the viability of any strategic initiative.

Provide Ethical Leadership

During prior financial crises, it was the CFO to whom people turned for straight answers to challenging questions. Whether it be employees, customers, board members, or investors, when people need to know the unvarnished truth, invariably they ask the CFO. And the CFO is expected to not only adhere to strict ethical standards, but also to create and maintain a culture where ethics are vital. This has never been more important than it is today. 

Build Elite Teams

While building elite teams remains important for CFOs, the focus of teambuilding has shifted. The last several years have been characterized by the “war for talent” as organizations could not hire enough people to keep up with the pace of growth. Obviously, this is no longer the case, as we have gone from the sellers’ market to the buyers’ market. This is a dramatic shift that will challenge the team-building skills of finance chiefs.

Rather than focus on recruiting and retention, CFOs today are tasked with getting maximum productivity from their teams in volatile circumstances. Work-from-home challenges have created turmoil across organizations, as workers struggle with issues (professional and personal) that were previously unimaginable. Also, furloughs and reductions in salary are common practices across most companies. Many firms had to reduce the workforce by 25% or more, and cut pay by 25% across the board, while asking the team to work harder than ever.

Master Deal-Making

This is perhaps an area that has become less important during this crisis, if for no other reason than that there are simply fewer deals being made than there was pre-pandemic. The IPO market is frozen, private equity financings are down, and M&A activity is much quieter than it has been in years. This all suggests that deal-making is less important to a CFO than it was a few months ago. However, do not diminish the importance of this skill. While activity is down, falling valuations may create acquisition opportunities that may have been out of reach a few months ago. A forward-thinking CFO may find long-term investment opportunities that simply were not available previously. In addition, activities such as debt refinancing and contract renegotiations with suppliers and customers are ongoing.

Learn Continuously

The main way CFOs learn is through peer-networking, and there has been an explosion of this in recent weeks. All of us are living in a world of uncertainty, and while there is nobody to turn to who has survived a crisis like this, it is more critical than ever to talk to your peers about challenges you are facing in your business.

Develop Board Relationships

Hopefully, during your tenure as CFO, you have been building solid relationships based upon mutual respect and trust. These relationships are now going to be critical. Board members are turning to the CFO to get the most objective and complete understanding of the companies they serve. Frequent 1:1 meeting between you and board members are advisable to enhance these relationships. Boards will also have similar relationships with the CEO, but the dynamic is different. Also, while CEOs are rarely dishonest, they do tend to be overly optimistic, an outlook which is likely to be even more pronounced during a crisis. It’s a reflection of confidence in their own ability to overcome any obstacle, so it’s a positive trait. But boards also benefit from a more realistic assessment of their companies, and often the CFO is the one who can best provide this.

Perform Cross-Functionally

It is no secret the role of the CFO has become increasingly cross-functional. Once limited to a back-office role, CFOs in recent years have become involved with all aspects of a business: sales, marketing, strategy, and operations. As organizations are forced to do more with less, the versatility of CFOs and other executives is going to prove critical to the survival of many organizations. 

Maintain Financial Expertise

Counter-intuitive though it may be, more CFOs today are not financial experts. Given how cross-functional the role has become, financial expertise is viewed in some circles as just one of many skills a CFO must have, but not the only one or even necessarily the most important one. But elite CFOs have remained financial experts, even if fewer of them are CPAs than in the past. It’s incumbent upon CFOs to be able to articulate meaningful financial data to their constituents, to explain the importance of this data, and to use it to drive better and faster decision-making than ever before. Elite CFOs can use financial data to make better and faster decisions.